Responses to our RFI on municipal electricity aggregation program
April 13, 2018
Last month, the City of Boston asked for information on how to develop and manage a municipal electricity aggregation program. We shared the request with energy experts, environmental non-profits, and community groups. It was open to any respondent. After a month, we received 19 responses and wanted to share what we heard.
What we heard
Most of the responses touched on energy procurement strategies. This means the different approaches to purchasing electricity in a competitive market. We also heard a lot on how to structure an aggregation program, meaning the nuts and bolts of making it work. Here are the takeaways:
- Procurement of consulting services. There are different ways to address the costs of an aggregation. Recent aggregations get competitive energy consulting services through municipal procurement to develop, put in place, and manage the program. In some cases the vendor agrees to no up-front form of payment. This means that the vendor will take on the risk of delivering initial services. Ratepayers would pay the vendor over time through an additional fee that would be bundled with the price of electricity, sometimes called an "adder." What we have seen in other aggregations is a $1/megawatt adder to cover implementation costs. Boston’s aggregation would result in approximately $1.5-$2 million of fees at this level. Given Boston’s size, this level of funding may allow the City to provide the significant community engagement required during an aggregation, even if the technical work and planning were procured at a lower cost or through a different mechanism. One such approach would be for the City to pay for the services up front on an hourly or fixed fee basis.
- Procurement of electricity supply. There are many technical recommendations on how to buy electricity that helps the City achieve its climate goals. The details range from length of term and frequency of purchases to the cost and benefits of fixed versus variable pricing. This also includes recommendations on where to source renewable energy. Others suggested not adding more renewable content, to keep consumer prices down.
- Community outreach. There are also different approaches to community outreach. Some suggested building it into the services of consultants and offered ideas on mailers, brochures, and public events. Other believed it was critical to remain within existing City services like Greenovate Boston. There were also cautions around consumer advocacy rights.
What we didn’t learn (and hoped we would have)
Estimates on Cost Savings. We invited vendors to share historical price data to estimate CCA cost savings to ratepayers. We did not get a single response that would allow us to perform these calculations. We hoped to learn this information to help justify investment in a CCA program. In its absence, Carbon Free Boston will continue to study the costs and benefits of a CCA to inform next steps.
The responses raised some new questions and left gaps in others, such as:
• What pricing should Boston customers expect with an aggregation?
• How do we build an effective community process for Boston?
• Will the aggregation be a strong tool for reducing Boston's greenhouse gas emission?
• Is an "adder" the right component for Boston's aggregation to pay for administration costs?
You can view an easy-to-read breakdown of the responses in this spreadsheet. You can also access the complete responses in this Google Folder.
What is a municipal electricity aggregation program?
A municipal electricity aggregation is when a city or town bulk purchases electricity for its community. It is also known as community choice aggregation or community choice energy. Within an aggregation, the city or town selects the electricity supply for its residents and small businesses. This supply of electricity is set as the new default service for customers. That means that customers will enroll in this service unless they choose not to. An aggregation may add more renewable energy content in its supply of energy than what is already required by state regulations. You can learn more about aggregations here on the MA Department of Public Utility website.
How electricity gets from source to home
When you pay your electric bill each month, you pay for two primary services. You pay for the actual generation of electricity, or supply, which can come from a variety of sources. Those sources may include power plants, wind farms, hydroelectric dams, or solar panels. You also pay for the distribution, or delivery, of that energy to get to your home or business.
Anyone in Massachusetts can choose to buy their electricity from any approved energy supplier. If you do not make that choice, you are automatically enrolled in your utility's default electric service plan. In Boston, Eversource is the utility that delivers our electricity. The MA Department of Public Utility requires Eversource to go out and buy electricity on a regular basis to set its default service plan. This gives Eversource a competitive edge because it represents all of these customer accounts. Eversource passes the entire cost of electricity to its customers.
Receiving these responses is an important first step in understanding how the City of Boston will proceed with its aggregation. As we move forward, we expect to refer to these responses to build out a successful program. Our analysis does not stop here. We will continue to rely on the insight of experts, including those who are leading Carbon Free Boston. We will continue to seek input from the community as we determine next steps. For more information, sign up for Greenovate Boston and check back here.